Bitcoin $645? Yeah, That’s Totally Reasonable
techcrunch.com
techcrunch.com
Combine this with absolutely zero efforts to estimate the worth of the Bitcoin system, how Bitcoin is used today, etc. That's the difference between being published at Techcrunch and more prestigious publications like http://www.nytimes.com/2013/10/31/technology/bitcoin-pursues... or http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/08...
Is it Bitcoin that will succeed, or some other cryptocurrency? I don't know, but it has a good shot at it because it has the first-mover advantage and benefits from network effect.
But Bitcoin is a known solution demonstrating how to implement a decentralized digital currency. It is working. Today. So the utility it has, and the impact it is about to make on society is enormous.
And, given that perhaps a few thousand collectors are each willing to pay a few dollars to own most of the world's BTC, there's perhaps six orders of magnitude of room for the price to fall.
This is a bubble, anyone who thinks otherwise doesn't understand that people make an effectively stupid amount of money by using bitcoin as a pump and dump scheme.
If you think this bubble is helping bitcoin as a currency, then you are terrifically incorrect. For all the good that bitcoin is capable of, how the hell do you base a payment system around something that has no price stability?
Things are so volatile this week, that even nearly-instantaneous transactions USD-->BTC-->BTC-->USD (whose utility isn't affected by the price of 1 BTC) aren't guaranteed to happen as expected. Better to wait a week for things to chill out. They will.
Now, you need some smartness to understand that the value in currencies is not in it´s physical value ($100 are worth maybe $0.02 in physical value), but how many people use it.
Millions of people now use bitcoin, thousands of businesses have started accepting bitcoin over the past 6 months. In a year these numbers will be 50-fold.
Things that people use a lot, are not bubbles. Also, this doesn't take into consideration the potential, which is a major factor determining a valuation. And that is that Bitcoin or something similar has the potential to replace all banks and all currencies entirely.
EDIT: Changed "don't have an underlying value" to have nothing backing up their immense valuation". And sorry I was a bit angry, but I've read it now a hundred times on hackernews over the past 2 years, we're in a bubble here, we're in a bubble there. It is not a bubble, when millions and millions of people are using it.
The 2000 bubble was a bubble because there were 300M internet users at the time. Now we have 2B, that's the difference.
This is not true. There are many bets you can make on something that doesn't have an underlying value which does not constitute a bubble -- and many bubbles can be formed from things which have underlying values (such as real estate.)
Have businesses using bitcoins doubled? Have users of bitcoin doubled? While possible, I must say that the chance of people investing in the currency not as a currency to be used but as a money multiplier would be a bubble.
What underlying value has bitcoin shown to necessitate a 2x increase of value in a week? I'm honestly curious.
Seriously you don't understand what a bubble is.
"It's when bets are made on things that don´t have an underlying value."
No. It's when speculation [betting] leads to overvaluing an "asset".
Homes have an underlying value. The bubble on home prices was a result of overvaluation [due to speculation].
After it levels off or busts you will have groups saying "I told you so" giving you the same 'evidence' they used now to support their claim.
People that are 'sure' they know which this is should invest in either its success or failure, as arguing with people and trying to convince them you are right does little besides potentially increase the number of people you would have to share your profits with.
In order for bitcoin to actually matter, it needs to grow. You're going to get $668 bitcoins no matter what, if people start using it. That's simple supply and demand. Network effects being what they are, it's going to grow quickly.
In order for Bitcoin to remain stable, it would need to grow slowly. Thanks to the Internet and the plethora of Bitcoin news lately, I just don't see that happening.
A better way to look at a quantity which has changed so much is to use a logarithm.
http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zvzl
When is a currency a currency? Until it isn't?
If the price collapsed to $10 tomorrow, then the international transfer market would still be worth $65000 at any given instant (duh, unless world trade collapses), it would just require 6500 BTC instead of 100 BTC. If the market can't provide 6500 BTC at $10 (I don't think it can..) then the market clearing price will rise until the transfer market obtains its average $65000.
The buy and hold and the pump and dump crowds get all confused about what it means.
The current exchange value on the open market has to remain constant-ish for months because of middlemen. So I ordered a Debian branded swiss army knife and the whole transaction must have taken months, I'd be pretty pissed if the exchange rate from $ to swiss francs or whatever it was varied much. On the other hand as a replacement for Western Union to send cash to Mexico or whatever, I guess the value needs to remain constant for what, like 10 minutes?
Things have value because we (collectively) believe they do. Currency is a numbering system. In practical terms, what matters is how easy are the numbers to use, and what's the relative value of one thing versus another.
And if you think we can rationally decide how many chickens a hip placement is worth, you're still nuts.
No, seriously.
Nothing is stable in an economy. Everything is dynamic. Everything is relative. Everything is a shared delusion. Luckily, most people buy into it, most of the time. When that fails, you get massive inflation.
the model i'm using is BTC as a new form of gold. the current value of all the gold in the world, by my primitive calculation, is around 4 trillion. if all the bitcoins in circulation eventually reach a quarter of that value - which i think is totally realistic, most likely an underestimate, that puts the price per bitcoin at over $100k, a number that already seemed reasonable to me.
my guess is it'll be there in less than 10 years. anybody want over / under?
The price is rapidly dropping, lost nearly 10% now from today's peak.
(That said, if you really want to buy, keep trying, Coinbase's buy limit opens and shuts sometimes.)
However I think that buying or holding bitcoin is just as crazy.
This is strictly a mental experiment. There is no way I am putting any kind of money into this market on any side.
Someone should probably start working on that.
Why do you say that? MPEx has been doing that for 3 years. As for how you get "them" back that is pretty obvious. How long would a margin call take with a digital currency, like 2 ms or something?